Saudi Arabia’s Bold Move: A Potential Game-Changer for the US Dollar

A Global Financial Paradigm Shift

Saudi Arabia, a long-standing ally of the United States, has recently joined the BRICS bloc. This move signifies a critical shift in the global financial landscape. BRICS, known for its de-dollarization efforts, now includes Saudi Arabia and the United Arab Emirates (UAE) as part of its 2023 expansion plan. This development could play a pivotal role in the group's initiatives, particularly in diversifying away from the U.S. dollar.

Thomas Hill, a former U.S. State Department official, has expressed serious concerns about this shift. Speaking to Business Insider, Hill highlighted the potential repercussions of Saudi Arabia's decision. As a member of BRICS, Saudi Arabia might accelerate the process of moving away from the USD, a trend that has been gaining momentum within the bloc.

The North African Perspective

North African countries, following Egypt's recent addition to BRICS, are becoming increasingly vocal advocates for de-dollarization. Hill, who now serves as the director for the North African Program at the U.S. Institute of Peace, notes the significance of traditional U.S. allies like Egypt, Saudi Arabia, and the UAE exploring alternatives to the dollar. This move is further supported by China, which is aiding these countries in their transition.

Global Implications of De-dollarization

The collective move away from the USD by BRICS nations, now bolstered by key Middle Eastern players, has profound implications. BRICS' expansion allows it access to new trade affiliations and platforms to promote alternative currencies. Through Egypt, the UAE, and Saudi Arabia, BRICS can extend its influence to over 90 countries, including those in the Greater Arab Free Trade Area (GAFTA) and the Common Market for Eastern and Southern Africa.

Digital Currency Initiatives

In a significant development, Egypt has issued yuan-denominated bonds. Additionally, the Bank of Russia has started using the Egyptian pound in setting ruble exchange rates. A notable project involving China, Hong Kong, Thailand, and the UAE is underway to develop a digital currency platform for cross-border payments. This platform could potentially establish the digital yuan as a key player in global financial transactions.

The Challenge for U.S. Policymakers

For U.S. policymakers, these developments signal an urgent need for attention. The de-dollarization efforts led by BRICS, particularly with the active participation of countries like Saudi Arabia, necessitate a comprehensive response from the U.S. government. This response should be backed by bipartisan legislative support. The federal government must devise strategies to counter this challenge and preserve the dollar's standing in the global financial system.

As the world observes these developments, the future of the U.S. dollar as the dominant global currency is uncertain. This potential reshaping of international financial systems could undermine the U.S.'s fiscal health and its ability to influence global economics, marking a turning point in global financial history.